Microsoft to buy embattled Activision Blizzard for $68.7 billion
Microsoft said Tuesday it is buying video game company Activision Blizzard for $68.7 billion in a transaction that will bring titles such as "World of Warcraft" and "Call of Duty" to the software giant. The purchase comes after Activision was sued over its "frat boy" culture and amid allegations of sexual harassment.
Microsoft said it will pay $95 per share in an all-cash transaction. That represents a 43% premium to Activision's closing stock price on Friday of $65.39. Shares of the video game developer jumped to $83.10 in Tuesday morning trading.
The deal will turn Microsoft, maker of the Xbox gaming system, into one of the world's largest video game companies and help it compete with tech rivals such as Meta, formerly Facebook, in creating immersive virtual worlds for both work and play. The acquisition would mark the biggest ever in tech history, exceeding the $67 billion Dell-EMC merger in 2016, according to Wedbush analyst Dan Ives.
Microsoft said CEO Bobby Kotick will continue in that role after the acquisition is completed. Kotick is under pressure from employees and some activist shareholders to step down amid allegations he ignored complaints about sexual harassment.
"With Activision's stock under heavy pressure (CEO related issues/overhang) over the last few months, Microsoft viewed this as the window of opportunity to acquire a unique asset that can propel its consumer strategy forward," Ives noted.
California officials sued Activision in July accusing the company of creating a workplace culture that allegedly subjected women to groping and unwanted advances.
Nadella: Workplace culture is No. 1 priority
Activision's workplace culture was addressed Tuesday by Microsoft CEO Satya Nadella in a conference call with investors.
"The culture of our organization is my number one priority," Nadella said, adding that "it's critical for Activision Blizzard to drive forward on its" commitments to improve its office culture.
Microsoft said it expects the deal to close in the upcoming 2023 fiscal year, which starts in July.
Activision executives will report to Microsoft Gaming CEO Phil Spencer once the deal is complete, the company said. With the deal, Microsoft will add titles including "Candy Crush" and "Diablo" to its portfolio, making it the world's third-largest gaming company by revenue, after Tencent and Sony.
If the deal survives scrutiny from U.S. and European regulators in the coming months, it could also be one of the biggest tech acquisitions in history. Dell bought data-storage company EMC in 2016 for around $60 billion.
The blockbuster transaction could trigger a series of mergers as video game companies seek to join forces with bigger technology players, according to industry watchers.
"We envision a world going forward that will be increasingly difficult for mid-scale publishers to compete, which may spark further consolidation," analysts with investment bank Raymond James said in a report, noting the focus on the emerging "metaverse."
"As more big tech and media companies recognize the reach and spend that gaming drives, as well as gaming's tip of the spear position for future metaverse opportunities, we expect to see further M&A in the space," they added.
—With reporting by the Associated Press.